Overall, ASX shares rose in the first week of August with the S&P/ASX 200 (ASX: XJO) up 1.3% last week. The first week of reporting season saw investors push the market higher despite the rising economic toll of Victoria’s coronavirus outbreak. The gold price reached US$2075 on Friday, fueling mining shares.
Myer Holding Ltd (ASX: MYR) gave investors some reassurance last week announcing it expects to report a small cash positive position at the end of FY20. But Insurance Australia Group Ltd (ASX: IAG) saw profits sink 60% as bushfires and coronavirus took their toll. On that note, let’s take a look at five of last week’s worst performing ASX shares.
Last week’s worst performing ASX shares
Australian Ethical Investment Limited (ASX: AEF)
The Australian Ethical Investment share price fell 16.50% last week to close the week at $5.06. The share price plunged on Friday morning when IOOF Holdings Limited (ASX: IFL) announced that it had sold 14.2 million of its 19.7 million shares in the company. The sale reduced IOOF’s stake in Australian Ethical Investment to 5.5 million shares, or 4.9%. IOOF CEO Renato Mota said, “Our investment in Australian Ethical Investment realised significant returns for our shareholders. This sale aligns to our transformation strategy which includes simplification of our business.”
Australian Ethical Investment is one of Australia’s leading ethical investment managers. At 30 June 2020, this ASX share had $4.05 billion in funds under management, a 12.9% increase for the quarter. Despite challenging market conditions, Australian Ethical Investment achieved record net inflows of $0.66 billion in the financial year to 30 June 2020, which drove an 18.6% increase in funds under management over the full year.
ResMed (ASX: RMD)
The ResMed share price dropped 11.39% last week to close the week at $25.06. The company released its fourth quarter results last week which disappointed investors. ResMed is a medical device manufacturer creating products to treat sleep apnea, chronic obstructive pulmonary disease, and other chronic diseases. Demand for the company’s ventilators has been high during the coronavirus pandemic leading to a 9% increase in revenue in the fourth quarter. Over the full year, revenue increased 13% to US$3 billion, but this was not enough to satisfy the market which had pushed ResMed’s share price up 43% from its March low.
Net operating profit increased 40% over the full year giving non-GAAP diluted earnings per share of $4.76, up from $3.64 in FY19. CEO Mick Farrell says the company is confident in its ability to navigate through the current challenging clinical and economic environment. It is supporting the coronavirus fight through increased production of its ventilators and mask systems while also providing digital health solutions and tools to enable remote care for patients. The company has a strong foundation which it believes will accelerate growth over the longer term.
Phoslock Environmental Technologies Ltd (ASX: PET)
The Phoslock share price fell 9.3% last week to finish the week at 20 cents. The company had provided a business update the week before which revealed first half revenues were down substantially on the prior period. Flooding and COVID-19 have impacted progress on key projects in China. But Phoslock says it is well prepared to restart projects in the region when circumstances improve. Increased inventory will allow for the rapid start up of delayed projects.
Several projects in Europe have also been impacted by COVID-19 related delays. Authorities with which Phoslock has contracted remediation works have cited more pressing expenditure priorities during the pandemic. While these projects have been delayed, Phoslock believes they will continue in due course. The company says its pipeline remains strong with a current contract value of $380 million. In China, the pipeline includes nearly $200 million in product sales and $50 million in engineering projects. Outside of China, the pipeline includes projects to the value of $130 million in the United States, Brazil, Mexico, Canada, and Europe.
Genworth Mortgage Insurance Australia Ltd (ASX: GMA)
The Genworth share price fell 9.14% last week to close the week at $1.54. The mortgage insurer delivered its first half results the week before which revealed a statutory loss of $90 million. The result was affected by the anticipated economic impacts of COVID-19 which led to a $181.8 million write down and an additional $35.5 million loss reserving. No dividend was paid for the period, with the company believing it prudent to preserve capital to sustain its capital position. Genworth paid a dividend of 9 cents per share in 1H19.
Genworth did deliver higher volume in its core lender mortgage insurance business, with new insurance written up 8.1% to $13.5 billion. This reflected pre-COVID-19 housing market growth and the benefit of a low interest rate environment. But post-COVID-19, ratings agency Standard & Poor’s downgraded its outlook on this ASX share to negative, with Fitch Ratings maintaining a negative outlook. At 30 June 2020, Genworth had received over 48,000 payment deferrals from its lender customers, representing 4% of insured loans in force. Genworth’s ultimate COVID-19 related claims will depend on the pace of economic recovery.
NRW Holdings Limited (ASX: NRW)
The NRW Holdings share price dropped 7.9% last week to close the week at $1.69. Shares in the diversified services company had risen sharply the week before on news it had been named the preferred proponent for the Bunbury Outer Ring Road Project. The Southwest Connex Alliance, of which NRW is a 40% partner, was named the preferred proponent for the $852 million project. The alliance now enters a period of negotiations. If these are successful, a contract is expected to be awarded next month.
NRW Holdings’ recent acquisition of BGC Contracting has significantly enhanced the company’s ability to participate as a large construction partner in public works projects. In its most recent update on its financial performance, for the 10 months to April, NRW Holdings reported record revenue of $1.6 billion. Earnings generation remained strong and there was a significant improvement in net debt which reached $115 million.
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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. and ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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